Wednesday, April 09, 2008

Some hard, basic truths about the P word

(The following comes from an ezine that I subscribe to. Although the article is aimed at UK readers, I'd imagine that the equation is just as true anywhere. Prices are in UK sterling, just double the figures to gain a US dollar equivalent.)

I don’t want to worry you, but I’m going to anyway.

It will only take just one word.

‘Pension.’

There, that put your anxiety level up a notch, didn’t it?

But please don’t stop reading, even though your everyinstinct will be screaming ‘Run! Run for your life...’

Check this out: 13 million people in the UK are savingNOTHING AT ALL towards their retirement. When I read thatthis morning, I almost choked on my cornflakes.

How much are YOU saving?

In fact, let me ask you another question: “How much do youNEED to save?”

To answer that, you need to know 2 things:

1. How much money you want when you retire?

2. How fast inflation and savings will grow?

And I’m going to make the answers easy for you.

It is widely agreed that when you retire, you need betweenhalf and two thirds of your current salary (or whateversalary you would be reasonably comfortable on right now).

Considering today’s money, if you’re on £25k (which, by theway, is the average salary in the UK) you need a pension ofbetween £12.5k and £16.5k. You can manage on this amountbecause you will not pay tax or NI on it, and your livingcosts are likely to be lower when you are older.

Fine. Next piece of the puzzle is this: “What’s that inFUTURE money then?”

Easy answer: Forget about that. As a first approximation,savings and inflation will grow at about the same rate, soyou only need to think in today’s money and not worry what aloaf of bread will cost in 30 years time, or what £1000saving will be worth in 30 years.

A quick and dirty (but good enough) calculation tells us thatif it costs you £20 a day to feed yourself now, it may cost£80 a day in 30 years from now, but if you save £20 now, itwill be worth £80 in 30 years and so you’ve lost nothing.

Final question (and you’re not going to like this)

Honestly... you’re REALLY not going to like this...

“How much do I need to save, then?”

Well, it depends how old you are but if you want two thirdsof final pay you need to save approximately:

If you start at 25, you need to save: 18% at 35 = 26% at 45 = 40% at 55 = 77%

I’m hoping that’s the biggest wake-up call you’ve had allyear!

Looking at those figures, you may feel shocked, defeated,hopeless. I don’t know.

One thing I DO know is that the sums are correct.

Don’t forget of course that if you’re able to get into adecent company scheme, your employer will contribute some ofthis on your behalf, so it’s not as bleak as it seems.

But, if you’re WAY below this level of saving then you aresetting yourself up for a miserable, impoverished old age.The state will give you about £100 a week and pay yourcouncil tax (both means tested!).

Could you live on that? I doubt it.

Maybe you think your house is your pension?

Firstly, let’s get something out of the way. This IS true ifyou have a property currently worth above a million, and/oryou own a string of flats or other houses totalling thisamount or more. If this is you, then congratulations. Barringmajor permanent property price collapse (most unlikely)you’re sorted.

But for everyone else, it’s time for some basic sums.

And it’s time to get real...

The average house in the UK is worth about £180,000.00,depending who you believe. Let’s be generous and say £200k.

But you have to live somewhere. Could you really live in aplace half the size? Maybe, but that’s a big downsize. And asyou know, a place half the size would not cost half the price– it doesn’t work like that!

Small places are more expensive, relatively. £200k would buyyou a 3-bed house in many areas. 100k would buy you a bedsit,not a 2-bed flat. So you need £130k of your £200k to getyourself a new place.

And of course I’m assuming that when you retire you will have100% equity in your house – mortgage fully paid off. That’sgoing to take some doing as most people are maxed-out ontheir mortgages having borrowed extra for really essentialstuff like designer kitchens, sofas, flat screen TVs and thesuch.

60k will buy you a flat rate pension of around £79 a week ifyou retire at 65. These figures are all in today’s money ofcourse.

Maybe you’re reading this sitting in a house worth £500k andare feeling rather smug?

Let’s see...

Well, you’re not going to live in a bedsit when you retire,particularly after enjoying a 4-5 bed home in a decent areafor many years.

And anyway, 65 is quite young these days and you may want tolive in your nice house for at least a further ten yearsbefore downsizing.

In any case I reckon you’re going to need £300k for a decent,smaller place in a rougher area. That leaves you £200k whichwill buy you a pension of about £250 a week. Okay, you couldprobably live on that, but my point is you may have thoughtyou would be FAR better off than that.

Again I’m also assuming you will have paid off your mortgage.And, by the way, I’m assuming you are happy to disinherityour children (if you have any or are thinking about havingsome)! They’ll be getting at least half less of the money.

Hey, you may be, but please at least think about that factor.You can’t spend most of your equity on a pension AND leave itto the kids.

So my strong advice to you today is to forget about yourhouse being a pension. It is no such thing... unless you area property tycoon with a string of properties – then you’reokay.

And please don’t forget we’ve seen an unprecedented boom inhouse prices over recent years. Many people who know aboutsuch things (or think they know!) say this is unsustainableand that prices will flatten off or fall. This means that thevalue of your ‘house pension’ will also fall in real terms.

Can’t happen? UK property prices have fallen each month forthe last five months.

Turn of the tide: feminists begin to regret

Cosmopolitan (The women's magazine that urges women to use men for sex) Editor Lorraine Candy has a change of mind and now urges women not to have "Soul-less sex":

"We didn't feel ashamed about one-night stands...this, we thought, is what feminism is about."

70s feminist Fay Weldon now says:

"It is the fault of me and my like, who... got it wrong.

So were we wrong, we feminists, setting women free? The results have been devastating – greater than we ever imagined.

We steamed ahead, changing the world with too little caution, and I hope the future will forgive us.

The pendulum has swung too far over. But it may yet swing back again. Societies, thank God, tend to be self-righting."

"Once a man could look forward to starting a family and the dignity that came from being the provider. Forget it. At best as a man you're decorative, look after the kids and earn a bit sometimes; at worst you're a write-off. Women are elbowing the men out. The boys get anxious, the girls swagger. The male suicide rate goes up, female down. Twenty-eight per cent of us now live in single person households - a lonely and unnatural state - and most of the 28 per cent consist of young men. It is strange that it is left to a woman to suggest, in the normal nurturing way, that men start some kind of movement to promote their gender's status and self-esteem - call it masculinism, brotherism, machoism, what you want - and some mark of the success of the feminist movement, that it needs to be done."

60's feminist Doris Lessing now says:"It is time we began to ask who are these women who continually rubbish men. The most stupid, ill-educated and nasty woman can rubbish the nicest, kindest and most intelligent man and no one protests.

Men seem to be so cowed that they can't fight back, and it is time they did."

An excerpt from an interview with Joan Rivers:

"She's not with the feminists when it comes to matters of the heart. For her, they're to blame for the current parlous state of our relationships, as depicted in these television Shows (Such as Sex in the city) and films. "I saw this coming. You cannot be equal to a man, you cannot make a man feel 'I don't need you' or 'I'll take my sex when I want it'. All these shows are so sad."

Camille Paglia :

"Women have been discouraged from genres such as sculpture that require studio training or expensive materials.

But in philosophy, mathematics, and poetry, the only materials are pen and paper.

Male conspiracy cannot explain ALL female failures.

I am convinced that, even without restrictions, there still would have been no female Pascal, Milton, or Kant.

. . . Even now, with all vocations open, I marvel at the rarity of the woman driven by artistic or intellectual obsession, that self-mutilating derangement of social relationship which, in its alternate forms of crime and ideation, is the disgrace and glory of the human species."

PubMed, which indexes the 3,000 leading medical journals, from the 1950s to present, contains 42 articles on women’s health for every one on men’s health.